The accompanying notes are an integral part
of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

December 31, 1999 and 1998

1.
Legislative History and Operations of the FSLIC Resolution FundLegislative History

The U.S. Congress
created the Federal Savings and Loan Insurance Corporation (FSLIC) through the enactment
of the National Housing Act of 1934. The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) abolished the insolvent FSLIC, created the FSLIC
Resolution Fund (FRF), and transferred the assets and liabilities of the FSLIC to the FRF
(except those assets and liabilities transferred to the Resolution Trust Corporation
(RTC)), effective on August 9, 1989. The FRF is responsible for winding up the affairs of
the former FSLIC.

The FIRREA was enacted to reform, recapitalize, and consolidate the federal deposit
insurance system. In addition to the FRF, FIRREA created the Bank Insurance Fund (BIF) and
the Savings Association Insurance Fund (SAIF). It also designated the Federal Deposit
Insurance Corporation (FDIC) as the administrator of these funds. All three funds are
maintained separately to carry out their respective mandates.

The FIRREA also created the RTC to manage and resolve all thrifts previously insured by
the FSLIC for which a conservator or receiver was appointed during the period January 1,
1989, through August 8, 1992. The FIRREA established the Resolution Funding Corporation
(REFCORP) to provide part of the initial funds used by the RTC for thrift resolutions.
Additionally, funds were appropriated for RTC resolutions pursuant to FIRREA, the RTC
Funding Act of 1991, the RTC Refinancing, Restructuring and Improvement Act of 1991, and
the RTC Completion Act of 1993.

The RTCs resolution responsibility was extended through subsequent legislation
from the original termination date of August 8, 1992. Resolution responsibility
transferred from the RTC to the SAIF on July 1, 1995.

The RTC Completion Act of 1993 (RTC Completion Act) terminated the RTC as of December
31, 1995. All remaining assets and liabilities of the RTC were transferred to the FRF on
January 1, 1996. Today, the FRF consists of two distinct pools of assets and liabilities:
one composed of the assets and liabilities of the FSLIC transferred to the FRF upon the
dissolution of the FSLIC on August 9, 1989 (FRF-FSLIC), and the other composed of the RTC
assets and liabilities transferred to the FRF on January 1, 1996 (FRF-RTC). The assets of
one pool are not available to satisfy obligations of the other.

The RTC Completion Act requires the FDIC to return to the U.S. Treasury any funds that
were transferred to the RTC pursuant to the RTC Completion Act but not needed by the RTC.
The RTC Completion Act made available approximately $18 billion worth of additional
funding. The RTC actually drew down $4.6 billion. During 1999, the FRF-RTC returned $4.2
billion to the U.S. Treasury.

The FDIC must transfer to the REFCORP the net proceeds from the FRFs sale of RTC
assets, after providing for all outstanding RTC liabilities. Any such funds transferred to
the REFCORP pay the interest on the REFCORP bonds issued to fund the early RTC
resolutions. Any such payments benefit the U.S. Treasury, which would otherwise be
obligated to pay the interest on the bonds (see Note 10).

Operations of the
FRF

The FRF will continue operations until all of its assets are sold or otherwise
liquidated and all of its liabilities are satisfied. Any funds remaining in the FRF-FSLIC
will be paid to the U.S. Treasury. Any remaining funds of the FRF-RTC will be distributed
to the U.S. Treasury to repay RTC Completion Act appropriations and to the REFCORP to pay
the interest on the REFCORP bonds.

The FRF has been primarily funded from the following sources: 1) U.S. Treasury
appropriations; 2) amounts borrowed by the RTC from the Federal Financing Bank (FFB); 3)
amounts received from the issuance of capital certificates to REFCORP; 4) funds received
from the management and disposition of assets of the FRF; 5) the FRFs portion of
liquidating dividends paid by FRF receiverships; and 6) interest earned on Special U.S.
Treasury Certificates purchased with proceeds of 4) and 5). If these sources are
insufficient to satisfy the liabilities of the FRF, payments will be made from the U.S.
Treasury in amounts necessary, as appropriated by Congress, to carry out the objectives of
the FRF.

Public Law 103-327 provided $827 million in funding to be available until expended to
facilitate efforts to wind up the resolution activity of the FRF-FSLIC. The FRF received
$165 million under this appropriation on November 2, 1995. In addition, Public Law 104-208
and Public Law 105-61 authorized the use by the U.S. Department of Justice (DOJ) of $26.1
million and $33.7 million, respectively, from the original $827 million in funding, thus
reducing the amount available to be expended to $602.2 million. The funding made available
to DOJ covers the reimbursement of reasonable expenses of litigation incurred in the
defense of claims against the United States arising from the goodwill litigation cases.

Additional goodwill litigation expenses incurred by DOJ are paid directly from the
FRF-FSLIC based on a Memorandum of Understanding (MOU) dated October 2, 1998, between the
FDIC and DOJ. Under the terms of the MOU, the FRF-FSLIC paid $79.1 million and $51.2
million to DOJ for fiscal years 1999 and 1998, respectively. Separate funding for goodwill
judgments and settlements is available through Public Law 106-113 (see Note
8).

Receivership Operations

The FDIC is responsible for managing and disposing of the assets of failed institutions
in an orderly and efficient manner. The assets held by receivership entities, and the
claims against them, are accounted for separately from FRF assets and liabilities to
ensure that liquidation proceeds are distributed in accordance with applicable laws and
regulations. Also, the income and expenses attributable to receiverships are accounted for
as transactions of those receiverships. Liquidation expenses incurred by the FRF on behalf
of the receiverships are recovered from those receiverships.

These financial statements pertain to the financial position, results of operations,
and cash flows of the FRF and are presented in accordance with generally accepted
accounting principles (GAAP). These statements do not include reporting for assets and
liabilities of closed thrift institutions for which the FDIC acts as receiver or
liquidating agent. Periodic and final accountability reports of the FDICs activities
as receiver or liquidating agent are furnished to courts, supervisory authorities, and
others as required.

Use of Estimates

FDIC management makes estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from these
estimates. Where it is reasonably possible that changes in estimates will cause a material
change in the financial statements in the near term, the nature and extent of such changes
in estimates have been disclosed.

Cash Equivalents

Cash equivalents are short-term, highly liquid investments with original maturities of
three months or less. Cash equivalents primarily consist of Special U.S. Treasury
Certificates.

The investment in securitization related assets acquired from receiverships is recorded
pursuant to the provisions of the Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS
No. 115 requires that securities be classified in one of three categories:
held-to-maturity, available-for-sale, or trading. The investment in securitization related
assets acquired from receiverships is classified as available-for-sale and is shown at
fair value with unrealized gains and losses included in Resolution Equity. Realized gains
and losses are included in the Statements of Income and Accumulated Deficit as components
of Net Income. The FRF does not have any securities classified as held-to-maturity or
trading.

Allowance for
Losses on Receivables from Thrift Resolutions and Assets Acquired from Assisted Thrifts
and Terminated Receiverships

The FRF records a receivable for the amounts advanced and/or obligations incurred for
resolving troubled and failed thrifts. The FRF also records as an asset the amounts paid
for assets acquired from assisted thrifts and terminated receiverships. Any related
allowance for loss represents the difference between the funds advanced and/or obligations
incurred and the expected repayment. The latter is based on estimates of discounted cash
recoveries from the assets of assisted or failed thrift institutions, net of all
applicable estimated liquidation costs. Estimated cash recoveries also include dividends
and gains on sales from equity instruments acquired in resolution transactions.

Cost Allocations
Among Funds

Operating expenses not directly charged to the funds are allocated to all funds
administered by the FDIC using workload-based-allocation percentages. These percentages
are developed during the annual corporate planning process and through supplemental
functional analyses.

Postretirement
Benefits Other Than Pensions

The FDIC established an entity to provide the accounting and administration of
postretirement benefits on behalf of the FRF, the BIF, and the SAIF. Each fund pays its
liabilities for these benefits directly to the entity. The FRFs unfunded net
postretirement benefits liability is presented in FRFs Statements of Financial
Position.

Disclosure About
Recent Accounting Standard Pronouncements

In February 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 132,
"Employers Disclosures about Pensions and Other Postretirement Benefits."
The Statement standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable. Although changes in the FRFs
disclosures for postretirement benefits have been made, the impact is not material.

Other recent pronouncements are not applicable to the financial statements.

Wholly Owned
Subsidiary

The Federal Asset Disposition Association (FADA) is a wholly owned subsidiary of the
FRF. The FADA was placed in receivership on February 5, 1990. The investment in the FADA
is accounted for using the equity method and is included in the "Other assets,
net" line item (see Note 6). Final judgment on the remaining litigation was made on
December 16, 1998. FADA was terminated with a final liquidating dividend by December 31,
1999.

Related Parties

Limited Partnership Equity Interests. Former RTC receiverships were holders of limited
partnership equity interests as a result of various RTC sales programs that included the
National Land Fund, Multiple Investor Fund, N-Series, and S-Series programs. The majority
of the limited partnership equity interests have been transferred from the receiverships
to the FRF. These assets are included in the "Receivables from thrift resolutions,
net" line item in the FRFs Statements of Financial Position. The nature of
related parties and a description of related party transactions are disclosed throughout
the financial statements and footnotes.

Reclassifications

Reclassifications have been made in the 1998 financial statements to conform to the
presentation used in 1999.

Restatement

The credit enhancement escrow accounts included in the "Investment in
securitization related assets acquired from receiverships" have been restated to
conform with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" and to reflect the related impact on each primary financial statement.
The change is due to interpretations in the FASBs recently issued special report,
"A Guide to Implementation of Statement 125 on Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," and to recognize the
investment characteristics of the credit enhancement escrow accounts.

Additionally, corrections were made for immaterial offsetting errors relating to the
purchase price of the credit enhancement escrow accounts and the residual certificates and
to the associated gain or loss calculations. The impact of these restatements on the
January 1, 1998 accumulated deficit is a reduction of $35.3 million.

The thrift resolution
process took different forms depending on the unique facts and circumstances surrounding
each failing or failed institution. Payments for institutions that failed were made to
cover obligations to insured depositors and represent claims by the FRF against the
receiverships assets. Payments to prevent a failure were made to operating
institutions when cost and other criteria were met.

As of December 31, 1999 and 1998, the FDIC, in its receivership capacity for the former
FSLIC and SAIF-insured institutions, held assets with a book value of $2.1 billion and
$2.6 billion, respectively (including cash and miscellaneous receivables of $1.5 billion
and $1.6 billion at December 31, 1999 and 1998, respectively). These assets represent a
significant source of repayment of the FRFs receivables from thrift resolutions. The
estimated cash recoveries from the management and disposition of these assets that are
used to derive the allowance for losses are based in part on a statistical sampling of
receivership assets. The sample was constructed to produce a statistically valid result.
These estimated recoveries are regularly evaluated, but remain subject to uncertainties
because of potential changes in economic conditions. These factors could cause the
FRFs and other claimants actual recoveries to vary from the level currently
estimated.

Receivables
from Thrift Resolutions, Net at December 31

Dollars in Thousands

1999

1998

Assets from open thrift assistance

$

437,265

$

529,123

Allowance for losses

(385,537)

(386,935)

Net Assets From Open Thrift Assistance

51,728

142,188

Receivables from closed thrifts

51,720,279

72,874,857

Allowance for losses

(50,405,663)

(71,500,480)

Net Receivables From Closed Thrifts

1,314,616

1,374,377

Total

$

1,366,344

$

1,516,565

Representations and Warranties

The RTC provided
guarantees, representations, and warranties on approximately $107 billion in unpaid
principal balance of loans sold and approximately $132 billion in unpaid principal balance
of loans under servicing right contracts that had been sold. In general, the guarantees,
representations, and warranties on loans sold related to the completeness and accuracy of
loan documentation, the quality of the underwriting standards used, the accuracy of the
delinquency status when sold, and the conformity of the loans with characteristics of the
pool in which they were sold. The representations and warranties made in connection with
the sale of servicing rights were limited to the responsibilities of acting as a servicer
of the loans. Future losses on representations and warranties could significantly increase
or decrease over the remaining life of the loans that were sold, which could be as long as
20 years.

The FRF includes estimates of corporate losses related to the receiverships
representations and warranties as part of the FRFs allowance for loss valuation. The
allowance for these estimated losses was $30 million and $81 million as of December 31,
1999 and 1998, respectively. There are additional amounts of representation and warranty
claims that are considered reasonably possible. As of December 31, 1999, the amount is
estimated at $339 million. The contingent liability for representations and warranties
associated with loan sales that involved assets acquired from assisted thrifts and
terminated receiverships are included in "Accounts payable and other
liabilities" ($4 million and $5 million for 1999 and 1998, respectively).

In order to maximize the return from the sale or disposition of
assets, the RTC engaged in numerous securitization transactions. The RTC sold $42.4
billion of receivership, conservatorship, and corporate loans to various trusts that
issued regular pass-through certificates through its mortgage-backed securities program.

A portion of the proceeds from the sale of the certificates was placed in credit
enhancement escrow accounts (escrow accounts) to cover future credit losses with respect
to the loans underlying the certificates. In addition, the escrow accounts were
established to increase the likelihood of full and timely distributions of interest and
principal to the certificate holders and thus increase the marketability of the
certificates. The FRFs exposure from credit losses on loans sold through the program
is limited to the balance of the escrow accounts. The FRF is entitled to any proceeds
remaining in the escrow accounts at termination of the securitization transactions. The
FRF also receives periodic returns of portions of the escrow account balances during the
life of the transactions, if the trustee deems the funds held to be excessive.

As part of the securitization transactions, the receiverships received a participation
in the residual pass-through certificates (residual certificates) issued through its
mortgage-backed securities program. The residual certificates entitle the holder to any
cash flow from the sale of collateral remaining in the trust after the regular
pass-through certificates and actual termination expenses are paid.

The escrow accounts were transferred from the receiverships to the FRF for $5.7
billion. This transfer was offset by amounts owed by the receiverships to the FRF. The
residual certificates were transferred from the receiverships to the FRF for $1.4 billion.
This transfer was also offset by amounts owed by the receiverships to the FRF.

The FRF received $910 million in proceeds from terminations during 1999 and $1.2
billion during 1998. Realized gains and losses are recorded based upon the difference
between the proceeds at termination of the deal and the cost of the original investment.
Realized gains and losses are calculated on both the escrow account and the related
residual certificate. Unrealized gains and losses are computed on a quarterly basis using
a cash flow model that calculates the estimated fair value of the assets at termination.
This model is updated with current data supplied by the trustees, which includes
prepayment speed, delinquency rates, and market pricing. Additionally, the FRF earned
interest income on the investment in securitization related assets acquired from
receiverships of $104.2 million during 1999 and $263 million during 1998.

Investment in
Securitization Related Assets Acquired from Receiverships at December 31, 1999

Dollars in Thousands

Cost

Unrealized
Holding
Gains

Unrealized
Holding
Losses

Fair
Value

Credit enhancement escrow accounts

$

1,563,722

$

249,185

$

(121,251)

$

1,691,656

Residual certificates

871,901

111,817

0

983,718

Total

$

2,435,623

$

361,002

$

(121,251)

$

2,675,374

Investment in
Securitization Related Assets Acquired from Receiverships at December 31, 1998

1) assets the former FSLIC and the former RTC purchased from failing or failed thrifts
and 2) assets the FRF acquired from receiverships and purchased under assistance
agreements. The methodology to estimate cash recoveries from these assets, which are used
to derive the related allowance for losses, is similar to that for receivables from thrift
resolutions (see Note 3). The estimated cash recoveries are based upon a
statistical sampling of the assets but only include expenses for the disposition of the
assets.

The FRF recognizes revenue and expenses on these acquired assets. Revenue consists
primarily of proceeds from professional liability claims, interest earned on loans, gain
on the sale of owned assets, and other liquidation income. Expenses are recognized for the
management and liquidation of these assets.

Assets Acquired from Assisted Thrifts and Terminated Receiverships, Net at
December 31

The FSLIC issued promissory notes and
entered into assistance agreements to prevent the default and subsequent liquidation of
certain insured thrift institutions. These notes and agreements required the FSLIC to
provide financial assistance over time. Pursuant to FIRREA, the FRF assumed these
obligations. Notes payable and obligations for assistance agreements are presented in the
"Liabilities from thrift resolutions" line item. Estimated future assistance
payments are included in the "Contingent liabilities for: Assistance agreements"
line item (see Note 8).

The contingent liabilities for assistance agreements are $4.8 million and $4.9
million at December 31, 1999 and 1998, respectively. The liability represents an estimate
of future assistance payments to acquirers of troubled thrift institutions. There were 28
and 33 assistance agreements outstanding as of December 31, 1999 and 1998, respectively.
The last agreement is scheduled to expire in July 2000.

Litigation Losses

The FRF records an estimated loss for unresolved legal
cases to the extent those losses are considered probable and reasonably estimable. In
addition to the amount recorded as probable, the FDIC has determined that losses from
unresolved legal cases totaling $141.3 million are reasonably possible.

Additional Contingency

In United States v. Winstar Corp., 518 U.S. 839
(1996), the Supreme Court held that when it became impossible following the enactment of
FIRREA in 1989 for the Federal Home Loan Bank Board to perform certain agreements to count
goodwill toward regulatory capital, the plaintiffs were entitled to recover damages from
the United States. To date, approximately 120 lawsuits have been filed against the United
States based on alleged breaches of these agreements (Goodwill Litigation).

On July 23, 1998, the U.S. Treasury determined, based on an opinion of the DOJs
Office of Legal Counsel (OLC) dated July 22, 1998, that the FRF is legally available to
satisfy all judgments and settlements in the Goodwill Litigation involving supervisory
action or assistance agreements. The U.S. Treasury further determined that the FRF is the
appropriate source of funds for payments of any such judgments and settlements.

The OLC opinion concluded that the nonperformance of these agreements was a contingent
liability that was transferred to the FRF on August 9, 1989, upon the dissolution of the
FSLIC. Under the analysis set forth in the OLC opinion, as liabilities transferred on
August 9, 1989, these contingent liabilities for future nonperformance of prior agreements
with respect to supervisory goodwill were transferred to the FRF-FSLIC, which is that
portion of the FRF encompassing the obligations of the former FSLIC. The FRF-RTC, which
encompasses the obligations of the former RTC and was created upon the termination of the
RTC on December 31, 1995, is not available to pay any settlements or judgments arising out
of the Goodwill Litigation.

The lawsuits comprising the Goodwill Litigation are against the United States and as
such are defended by the DOJ. On January 31, 2000, the DOJ informed the FDIC that, in the
approximately 100 remaining cases which are in litigation at the trial court level,
"it is too early to predict the extent of any litigation risk." The DOJ notes
that this uncertainty arises, in part, from the existence of significant unresolved issues
pending at the appellate or trial court level, as well as the unique circumstances of each
case.

The FDIC believes that it is probable that additional amounts, possibly substantial,
may be paid from the FRF-FSLIC as a result of judgments and settlements in the Goodwill
Litigation. However, based on the response from the DOJ, the FDIC is unable to estimate a
range of loss to the FRF-FSLIC from the Goodwill Litigation, or determine whether any such
loss would have a material effect on the financial condition of the FRF-FSLIC.

Section 110 of the Department of Justice Appropriations Act, 2000 (Public Law 106-113,
Appendix A, Title I, 113 Stat. 1501A-3, 1501A-20) provides to the FRF-FSLIC such sums as
may be necessary for the payment of judgments and compromise settlements in the Goodwill
Litigation, to remain available until expended. Even if the Goodwill Litigation judgments
and compromise settlements were to exceed other available resources of the FRF-FSLIC, an
appropriation is available to pay such judgments and settlements. In these circumstances,
any liabilities for the Goodwill Litigation should have no material impact on the
financial condition of the FRF-FSLIC.

The provision for losses was a negative $278 million and a
negative $1.2 billion for 1999 and 1998, respectively. In both years, the negative
provision resulted primarily from decreased losses expected for assets in liquidation. The
following chart lists the major components of the negative provision for losses.

As stated in the Legislative History section of Note 1, the
FRF is comprised of two distinct pools: the FRF-FSLIC and the FRF-RTC. The FRF-FSLIC
consists of the assets and liabilities of the former FSLIC. The FRF-RTC consists of the
assets and liabilities of the former RTC. Pursuant to legal restrictions, the two pools
are maintained separately and the assets of one pool are not available to satisfy
obligations of the other.

The following table shows the contributed capital, accumulated deficit, and resulting
resolution equity for each pool.

Resolution Equity at December 31, 1999

Dollars in Thousands

FRF

FRF-FSLIC

FRF-RTC

Consolidated

Contributed capital - beginning

$

44,156,000

$

91,334,742

$

135,490,742

Miscellaneous payments/adjustments

1,000

4,531

5,531

Less: U.S. Treasury repayments

0

(4,167,774)

(4,167,774)

Contributed capital - ending

44,157,000

87,171,499

131,328,499

Accumulated deficit

(41,929,682)

(82,743,074)

(124,672,756)

Less: Unrealized loss on
available-for-sale securities

0

(954)

(954)

Accumulated
deficit, net

(41,929,682)

(82,744,028)

(124,673,710)

Total

$

2,227,318

$

4,427,471

$

6,613,789

Resolution
Equity at December 31, 1998

Dollars in Thousands

FRF

FRF-FSLIC

FRF-RTC

Consolidated

Contributed capital

$

44,156,000

$

91,334,742

$

135,490,742

Accumulated deficit

(42,057,685)

(83,222,170)

(125,279,855)

Less: Unrealized gain on

available-for-sale securities

0

199,692

199,692

Accumulated deficit, net

(42,057,685)

(83,022,478)

(125,080,163)

Total

$

2,098,315

$

8,312,264

$

10,410,579

Contributed Capital

To date, the FRF-FSLIC and the former RTC received $43.5 billion and $60.1 billion from
the U.S. Treasury, respectively. These payments were used to fund losses from thrift
resolutions prior to July 1, 1995. Additionally, the FRF-FSLIC issued $670 million in
capital certificates to the FICO and the RTC issued $31.3 billion of these instruments to
the REFCORP. FIRREA prohibited the payment of dividends on any of these capital
certificates.

The FRF-FSLICs contributed capital at December 31, 1999, includes $1 million
received from the U.S. Treasury to fund a current year goodwill litigation settlement (see
Note 8). The FRF-RTCs contributed capital at December 31, 1999, includes an
adjustment of $4.5 million that relates to prior year appropriations.

Accumulated Deficit

The accumulated deficit represents the cumulative excess of expenses over
revenue for activity related to the former FSLIC and the former RTC ($29.7 billion and
$87.9 billion were brought forward from the FSLIC and RTC, respectively).

Resolution Equity Restrictions

FRF-RTC: The former RTC drew down $4.6 billion of the approximately $18 billion
made available by the RTC Completion Act. The RTC Completion Act requires the FDIC to
deposit in the general fund of the U.S. Treasury any funds transferred to the RTC but not
needed by the RTC. The FDIC returned $4.2 billion to the U.S. Treasury on behalf of the
FRF-RTC, pursuant to the RTC Completion Act, during 1999.

In addition, the FDIC must transfer net proceeds from the sale of RTC assets to
pay interest on the REFCORP bonds, after providing for all outstanding RTC liabilities.
Any such payments benefit the U.S. Treasury, which would otherwise be obligated to pay the
interest on the bonds (see Note 1).

11.
Pension Benefits, Savings Plans, and Accrued Annual Leave

Eligible FDIC employees (permanent and term employees with
appointments exceeding one year) are covered by either the Civil Service Retirement System
(CSRS) or the Federal Employees Retirement System (FERS). The CSRS is a defined benefit
plan, which is offset with the Social Security System in certain cases. Plan benefits are
determined on the basis of years of creditable service and compensation levels. The
CSRS-covered employees also can contribute to the tax-deferred Federal Thrift Savings Plan
(TSP).

The FERS is a three-part plan consisting of a basic defined benefit plan that provides
benefits based on years of creditable service and compensation levels, Social Security
benefits, and the TSP. Automatic and matching employer contributions to the TSP are
provided up to specified amounts under the FERS.

During 1998, there was an open season that allowed employees to switch from CSRS to
FERS. This did not have a material impact on FRFs operating expenses for 1998.

Although the FRF contributes a portion of pension benefits for eligible employees, it
does not account for the assets of either retirement system. The FRF also does not have
actuarial data for accumulated plan benefits or the unfunded liability relative to
eligible employees. These amounts are reported on and accounted for by the U.S. Office of
Personnel Management (OPM).

Eligible FDIC employees also may participate in a FDIC-sponsored tax-deferred 401(k)
savings plan with matching contributions. The FRF pays its share of the employers
portion of all related costs.

The FRFs pro rata share of the Corporations liability to employees for
accrued annual leave is approximately $6.9 million and $5.4 million at December 31, 1999
and 1998, respectively.

Pension Benefits and Savings Plans Expenses for the Years
Ended December 31

On January 2, 1998, the FRFs obligation under SFAS No.
106, "Employers Accounting for Postretirement Benefits Other Than
Pensions," for postretirement health benefits was reduced when over 6,500 FDIC
employees enrolled in the Federal Employees Health Benefits (FEHB) Program for their
future health insurance coverage. The OPM assumed the FRFs obligation for
postretirement health benefits for these employees at no initial enrollment cost.

In addition, legislation was passed that allowed the remaining 2,600 FDIC retirees and
near-retirees (employees within five years of retirement) in the FDIC health plan to also
enroll in the FEHB Program for their future health insurance coverage, beginning January
1, 1999. The OPM assumed the FRFs obligation for postretirement health benefits for
retirees and near retirees for a fee of $32 million. The OPM is now responsible for
postretirement health benefits for all FDIC employees and covered retirees. The FDIC will
continue to be obligated for dental and life insurance coverage for as long as the
programs are offered and coverage is extended to retirees.

The OPMs assumption of the health care obligation constituted both a settlement
and a curtailment as defined by SFAS No. 106. This conversion resulted in a gain of $39
million to the FRF in 1998.

Postretirement Benefits Other
Than Pensions

Dollars in Thousands

1999

1998

Funded
Status at December 31

Fair value of plan assets (a)

$

14,994

$

14,337

Less: Benefit obligation

16,130

14,337

Under Funded Status of the Plans

$

1,136

$

0

Accrued benefit liability recognized in
the Statements of Financial Position

$

1,136

$

0

Expenses and Cash Flows for the Period Ended
December 31

Net periodic benefit cost

$

563

$

(919)

Employer contributions

202

886

Benefits paid

202

886

Weighted-Average
Assumptions at December 31

Discount rate

4.50%

4.50%

Expected return on plan assets

4.50%

4.50%

Rate of compensation increase

3.00%

4.00%

(a) Invested in U.S. Treasury
obligations.

Total dental coverage trend rates were assumed
to be 7% per year, inclusive of general inflation. Dental costs were assumed to be subject
to an annual cap of $2,000.

The RTC had adopted special policies that included honoring outstanding
conservatorship and receivership collateralized letters of credit. This enabled the RTC to
minimize the impact of its actions on capital markets. In most cases, these letters of
credit were issued by thrifts that later failed and were used to guarantee tax-exempt
bonds issued by state and local housing authorities or other public agencies to finance
housing projects for low and moderate income individuals or families. As of December 31,
1999 and 1998, securities pledged as collateral to honor these letters of credit totaled
$7.6 million and $21.4 million, respectively. The FRF estimated corporate losses related
to the receiverships letters of credit as part of the allowance for loss valuation.
The allowance for these losses was $1.1 million and $6.3 million as of December 31, 1999
and 1998, respectively.

Leases

The FRFs allocated share of the FDICs lease commitments totals $22.6
million for future years. The lease agreements contain escalation clauses resulting in
adjustments, usually on an annual basis. The allocation to the FRF of the FDICs
future lease commitments is based upon current relationships of the workloads among the
FRF, the BIF, and the SAIF. Changes in the relative workloads could cause the amounts
allocated to the FRF in the future to vary from the amount shown below. The FRF recognized
leased space expense of $7.2 million and $6.3 million for the years ended December 31,
1999 and 1998, respectively.

As of December 31, 1999, the FRF had gross receivables from thrift
resolutions totaling $52.2 billion, gross assets acquired from assisted thrifts and
terminated receiverships totaling $149 million, and an investment in securitization
related assets acquired from receiverships totaling $2.7 billion. The allowance for loss
against receivables from thrift resolutions totaled $51.0 billion, and the allowance
against the assets acquired from assisted thrifts and terminated receiverships totaled
$114 million.

Cash recoveries may be influenced by economic
conditions. Similarly, the value of the investment in securitization related assets
acquired from receiverships can be influenced by the economy of the area relating to the
underlying loans and other assets. Accordingly, the FRFs maximum exposure to
possible accounting loss is the recorded (net of allowance) value and is also shown in the
table below.

Cash equivalents are short-term, highly liquid investments and are
shown at current value. The carrying amount of short-term receivables and accounts payable
and other liabilities approximates their fair market value. This is due to their short
maturities or comparisons with current interest rates.

The net receivables from thrift resolutions
primarily include the FRFs subrogated claim arising from payments to insured
depositors. The receivership assets that will ultimately be used to pay the corporate
subrogated claim are valued using discount rates that include consideration of market
risk. These discounts ultimately affect the FRFs allowance for loss against the net
receivables from thrift resolutions. Therefore, the corporate subrogated claim indirectly
includes the effect of discounting and should not be viewed as being stated in terms of
nominal cash flows.

Although the value of the corporate subrogated
claim is influenced by valuation of receivership assets (see Note 3),
such receivership valuation is not equivalent to the valuation of the corporate claim.
Since the corporate claim is unique, not intended for sale to the private sector, and has
no established market, it is not practicable to estimate its fair market value.

The FDIC believes that a sale to the private
sector of the corporate claim would require indeterminate, but substantial discounts for
an interested party to profit from these assets because of credit and other risks. In
addition, the timing of receivership payments to the FRF on the subrogated claim does not
necessarily correspond with the timing of collections on receivership assets. Therefore,
the effect of discounting used by receiverships should not necessarily be viewed as
producing an estimate of market value for the net receivables from thrift resolutions.

The majority of the net assets acquired from
assisted thrifts and terminated receiverships (except real estate) is comprised of various
types of financial instruments, including investments, loans, and accounts receivable.
Like receivership assets, assets acquired from assisted thrifts and terminated
receiverships are valued using discount rates that include consideration of market risk.
However, assets acquired from assisted thrifts and terminated receiverships do not involve
the unique aspects of the corporate subrogated claim, and therefore the discounting can be
viewed as producing a reasonable estimate of fair market value.

The investment in securitization related assets
acquired from receiverships is adjusted to fair value at each reporting date using a
valuation model that estimates the present value of estimated expected future cash flows
discounted for the various risks involved, including both market and credit risks, as well
as other attributes of the underlying assets (see Note 4).

16. Supplementary Information Relating to the
Statements of Cash Flows

Reconciliation of Net Income to Net Cash Provided by Operating
Activities for the Years Ended December 31

Dollars in Thousands

1999

1998

Net Income

$

407,407

$

1,657,793

Adjustments to Reconcile Net Income to Net Cash
Provided by

Operating
Activities

Income Statement Items:

Interest on Federal Financing Bank borrowings

0

18,068

Provision for losses

(278,267)

(1,176,165)

Gain on conversion of benefit plan

0

(39,297)

Prior year appropriation adjustments

4,531

0

Change in Assets and Liabilities:

Decrease in receivables from thrift resolutions

437,750

2,307,756

Increase in securitization related assets acquired from
receiverships

(21,365)

(1,415,155)

Decrease in assets acquired from assisted thrifts and terminated
receiverships

13,788

61,928

Decrease (Increase) in other assets

35,680

(389,691)

Increase (Decrease) in accounts payable and other liabilities

34,710

(125,545)

(Decrease) in accrued interest on notes payable

0

(28,950)

(Decrease) Increase in liabilities from thrift resolutions

92,414

130,794

Increase in contingent liabilities for litigation losses

3,968

13,897

(Decrease) in contingent liabilities for assistance agreements

0

(1,476)

Net Cash Provided by Operating
Activities

$

730,616

$

1,013,957

Noncash Investing Activity

The FRF
acquired securitization residual certificates through a noncash purchase from its
receiverships. This noncash transaction valued at $1.4 billion was applied to amounts owed
by FRF receiverships which resulted in a reduction to the "Receivables from thrift
resolutions, net" line item and an increase in the "Investment in securitization
related assets acquired from receiverships" line item (see Note 4).

The FDIC, as administrator for the FRF, conducted a corporate-wide effort to
ensure that all FDIC information systems were Year 2000 compliant. This meant that systems
must accurately process date and time data in calculations, comparisons, and sequences
after December 31, 1999, and be able to correctly deal with leap-year calculations in
2000. An oversight committee comprised of FDIC division management directed the Year 2000
effort.

The FDICs Division of Information Resources
Management (DIRM) led the Year 2000 effort, under the direction of the oversight
committee. The internal Year 2000 team used a structured approach and rigorous program
management as described in the U.S. General Accounting Offices (GAO) Year 2000
Computing Crisis: An Assessment Guide. This methodology consisted of five phases under the
overall umbrellas of Program and Project Management. The FDIC completed all of the
recommended GAO phases: Awareness, Assessment, Renovation, Validation, and Implementation.

As a precautionary measure, the FDIC developed a
Year 2000 Rollover Weekend Strategy to monitor the information systems during the
transition into the year 2000. Contingency plans were in place for mission-critical
application failures and for other systems. No major problems were anticipated due to the
extensive planning and validation that occurred (see Note 18).

Year 2000 Estimated Costs

Year 2000 compliance expenses for the FRF are
estimated at $1.3 million and $2.1 million at December 31, 1999 and 1998, respectively.
These expenses are reflected in the "Operating expenses" line of the FRFs
Statements of Income and Accumulated Deficit.

On January 1, 2000, all FDIC systems were
operating normally as a result of a corporate-wide effort to ensure that all FDIC
information systems were Year 2000 compliant prior to December 31, 1999. No internal
system failures have occurred and none are anticipated (see Note 17).